Anticipated pressure on domestic and global markets throughout the week

Indian stock indices faced a week of susceptibility caused by unfavorable global and domestic signals, coupled with investor inclination towards safer assets such as the US dollar.

New Delhi: Investor sentiment remains subdued due to the high volatility of the global currency market, leading to a high depreciation of EM currencies, which affects the performance of equities, says Vinod Nair, Head of Research at Geojit Financial services.

Indian indices encountered a week of vulnerability due to adverse global and domestic cues, accompanied by a shift towards safer assets by investors like the US dollar.

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Discouraging domestic industrial production, negative wholesale inflation, and elevated CPI inflation contributed to market volatility, he said.

Additional strains emerged from stronger-than-expected US retail sales data; adding to Fed rate hike fears, concerns about US bank rating downgrades, and a sudden Chinese central bank rate cut hindered recovery and sustained selling pressure, he added.

Escalating US bond yields are predicted to restrict foreign investments in India, further impacting market dynamics. With moderate core inflation & transitory July retail CPI data, the market did not foresee a rate hike. The metal sector bore the brunt this week due to sluggish industrial data and concerns about Chinese demand.

Mayank Mehraa, smallcase manager and Principal Partner, Craving Alpha said Nifty’s 3.4% four-week descent from nearly 20,000 to 19,300 indicates a pause in its upward trajectory, with this week seeing a 0.7% fall.

Factors include re-evaluation of the strong trend driven by Indian indicators and FII inflows. The US 20-year T Bond rise to 4.5% may divert liquidity from emerging markets like India.

Elevated Indian inflation figures might impact expected rate cuts or lead to hikes. Sectors like Metal & Mining, Larger Auto players like Hero Moto and Tech companies contributed to the fall. The ongoing correction could extend through September, with Q2 results possibly sparking a new bullish phase in October, he said.

Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services said with Fed Chair Powell’s speech and more macro data lined up globally next week, we expect domestic as well as global markets to remain under pressure. Also, RBI would release its meeting minutes on Thursday.

However, action is likely to continue in the broader market along with sectorial rotation. Index heavyweight Reliance would be in focus as Jio financial services is set to be listed on Monday, he added.

Rupak De, Senior Technical analyst at LKP Securities said the index has consistently remained below its 21-day Exponential Moving Average (EMA), a sign that underscores the prevalence of a bearish trend. On the lower end, support is placed at 19250. A fall below 19250, may trigger a correction towards 19000 and lower. On the higher end, resistance was placed at 19500.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities said the short term trend of Nifty continues to be weak with range bound action. There is a possibility of a downside breakout of the immediate support of 19250 levels and the Nifty could slide down to another base area of 19100-19000 levels in the near term. Any upside bounce could find resistance around 19400 levels.

Devarsh Vakil – Deputy Head Retail Research, HDFC Securities said there is a possibility of down side breakout of the immediate support of 19250 levels and the Nifty could slide down to another base area of 19100-19000 levels in the near term. Recent swing high of 19482 is expected to act as a short-term resistance for the Nifty.